Charles W. Snader wrote:

- quote -

Maybe something in the chapter gives a clue. Out of which
textbook did that question arise? Sounds like a graduate
course in taxes, though.

cheer$,
Harlan Lunsford, EA n LA

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"Charles W. Snader" <cws[at]cwscpa.com> wrote:

- quote -

Is this a homework problem?

Gene E. Utterback, EA

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Any guidance on this would be appreciated.

Question:

Mr. Jones is the 100% owner of XYZ, Inc. (a C Corporation).
Mr Jones sells his common stock in XYZ, Inc. to ABC Company
in exchange for an installment note receivable over the next
5 years. The common stock of XYZ, Inc. is collateral on the
note.

During the next two years ABC Company operates XYZ at a loss.

In year 3 ABC Company defaults on the note and Mr. Jones
takes the collateral (common stock) thereby becoming the
owner of XYZ, Inc. once again. Mr. Jones is now operating
XYZ, Inc.

XYZ, Inc. is profitable during year 3 under Mr. Jones.

What if any impact does the change in ownership (from ABC
Company to Mr. Jones) have on the ability of XYZ, Inc. to
use its net operating loss carryforward from the years it
was owned by ABC Company to offset its profit in year 3?

Note: XYZ, Inc. has not been reorganized either by ABC or
Mr. Jones and XYZ has continued to operate in the same line
of business during all years.

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